NYX Nyse Euronext

A looming $300 million write-down in the value of Goldman Sachs's market-making operations on the floor of the New York Stock Exchange is just another example of how rapidly evolving changes in stock trading have affected Wall Street.

Goldman is just one of five so-called designated market makers working the floor at NYSE Euronext (NYX), but has acknowledged for several quarters that conditions haven't been favorable for the business. First it had issues with slow data feeds. Then it felt the pinch from low trading volumes.

It disclosed in its third quarter regulatory filing in November that it would reassess the business in December and if a "meaningful" improvement didn't come, it could write down $300 million of the carrying value on its books, which at Sept. 30 was $391 million.

Analysts are expecting that charge to come in the fourth quarter. On Thursday, Ticonderoga Securities analyst Doug Sipkin lowered his fourth-quarter estimate for Goldman earnings to $4.00 a share from $5.85, citing a weak trading quarter and the possible write-down. The average estimate of analysts is $4.03 a share.

A Goldman spokesman declined to comment on the possible write-down.

It doesn't mean an exit from the business, but it does recognize the division's value has substantially eroded since Goldman acquired Spear Leeds & Kellogg a decade ago.

Goldman bought Spear Leeds in 2000 for $6.5 billion, becoming the biggest specialist on the floor of the New York Stock Exchange. Spear Leeds had several other businesses that were also attractive, particularly its market-making and clearing operations at Nasdaq and other exchanges and a spate of electronic trading technology.

But the floor specialists were already a dying breed. By then markets were moving rapidly toward high-speed electronic trading and away from the more traditional floor-based auction model.

The specialist business was still lucrative until two big regulatory changes--the move to decimal from fraction trading in 2001, which slashed margins for market makers, and Regulation National Market System in 2005, which unleashed a flood of competition for trading volume by upstart electronic trading venues, rapidly eroding the once-dominent market share of the New York Stock Exchange.

Several old-line specialist firms have exited the business since then, including LaBranche and Van der Moolen. Only two from the old era remain, Goldman and Bank of America. Barclays inherited its business from Lehman Brothers. Knight Capital and high frequency trading firm Getco LLC bought into the business last year.

-By Liz Moyer, Dow Jones Newswires; 212-416-2512; liz.moyer@dowjones.com

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